In the midst of its continued success, some investors are betting that the company's seemingly unstoppable rise is about to come to an end.$NVIDIA (NVDA.US)$Amid the severe correction, JPMorgan Asia-Pacific Equity Fund continues to be bullish on Asian semiconductor stocks, believing that their low valuations mean there is still room for growth.
Oliver Cox, co-manager of the $1.2 billion JPMorgan Asia Pacific Equity Fund, expects sales growth at companies in the China-Taiwan, Japan and South Korea chip supply chains to accelerate as the AI trend continues. The fund's investment in Asian chip stocks has helped it outperform 97% of peers over the past five years. Cox said, 'We've seen significant multiple expansion in the major US chip companies, but not much in the Asian supply chain, so I think there is still room to catch up.'
According to data, the fund's investment in Asian chip stocks in the past five years has helped it outperform 97% of peers. Cox said, 'We've seen significant multiple expansion in the major US chip companies, but not much in the Asian supply chain, so I think there is still room to catch up.'
Despite nvidia falling for three consecutive days after hitting a record high stock price,$PHLX Semiconductor Index (.SOX.US)$Despite three consecutive days of decline after hitting a record high, Nvidia still has an expected P/E ratio of about 28 times, higher than the five-year average of 20 times. Bloomberg's index tracking the P/E ratio of major Asian chip companies has an expected P/E ratio of about 17 times, with the valuation gap between the two at its largest since 2009.
At the same time, Asia is a crucial link in the global chip industry supply chain. Cox said that almost all the 'frontline' production bases in the chip industry are located in Asia. With the accelerated development of AI, these production bases will be key to achieving the ambitious goals of the industry.
In 2023, Cox was already a bull on Asian semiconductor stocks. At the time, he predicted that AI could become a more significant driver of profit growth for Asian enterprises and that the AI order boom in Asia could continue throughout 2024. In addition to the lower valuations than US semiconductor stocks, South Korean suppliers may also benefit from the shortage of DRAM memory. Investor pricing will begin to reflect more AI orders for Asian enterprises, pushing up their valuations.$Taiwan Semiconductor (TSM.US)$According to the prospectus in April, Samsung Electronics and SK Hynix, both South Korean chip manufacturers, are also among the fund's top six holdings. Meanwhile, Taiwan Semiconductor's stock has risen more than 58% this year, while its main customer, Nvidia, has seen its share price increase by 138%.
Although many Asian chip companies have performed well following in Nvidia's footsteps, Cox still believes they have room for growth. He said, 'We believe there is still room for growth. This industry cycle looks relatively early.'
By 2023, Cox of JPMorgan is already identifying himself as a bullish believer of Asian chip stocks, expecting AI to be a bigger driver of profit growth for Asian enterprises, and the AI order boom for Asian enterprises may continue throughout 2024. In addition to having lower valuations than US chip stocks, South Korean suppliers may also benefit from DRAM memory shortages. Investor pricing will begin to reflect Asian enterprises receiving more AI orders, and push up the valuations of these enterprises.
Recently, Morgan Stanley also upgraded its rating on the chip industry in China and Japan. Analysts believe that the deflation of the tech sector, coupled with the long-term demand for semiconductors brought about by AI, is expected to drive the logic of the next semiconductor industry cycle.
Editor: Eason